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Posts Tagged ‘AIG’

Jonathan Weil Reviews “The Truman Economy”

Posted by Larry Doyle on September 20th, 2010 7:13 AM |

What can we believe? Can we believe the economic reports put forth by our government? Can we believe the quarterly reports put forth by our financial institutions? Can we believe the price action in our markets? While “the market is the market,” has our country ever experienced a period in which there is such a massive disconnect between the real economy and what Uncle Sam has generated?

I am often reminded of the fabulous hit movie, The Truman Show, when thinking of our current economy and markets. How much of our economy is based on reality and what is merely staged? Bloomberg’s Jonathan Weil once again distinguishes himself in providing an “economic and market reality check” of our ‘Uncle Sam’ economy circa 2010. Weil writes, Zombie Banks Have Us Right Where They Want Us:

Two years after the collapse of Lehman Brothers and what rightfully should have been the death of American International Group, U.S. capital markets face a crucial question.

How long will it take before we see some semblance of robust free-market capitalism return, where the value of an asset is based on what bona fide market participants will pay for it, the cost to borrow money is based on a company’s fundamental financial strength rather than its ability to access a government safety net, and corporations are free to fail no matter what their size? (more…)

Indict, Prosecute, Convict the Fraudsters…Or Else!!

Posted by Larry Doyle on June 2nd, 2010 1:20 PM |

Has America lost the courage to aggressively address those who commit fraud? Is the American public even aware of the massive fraud perpetrated by those in our financial system which led to our current economic crisis? Are those in Washington willing to take a stand, risk their own skins, call out those engaged in fraud, even if some of the fraudsters occupy neighboring seats at nearby regulatory bodies?

Unless we find people in our government who are willing to make these calls, repeat them publicly in a long, loud fashion, and compel prosecutors to issue indictments, then I fear our union will pay a price and incur a cost that may be immeasurable.

Why so strong? Why so strident? (more…)

Should AIG Units Be Placed into Bankruptcy?

Posted by Larry Doyle on May 26th, 2010 3:17 PM |

Our financial regulators, government officials, and central bankers may believe the shell game being played with AIG might work to lure buyers into the AIG den but the fact is AIG remains the institutional equivalent of  ‘dead man walking.’

Who gets that and is not reluctant to speak her mind? Tarp watchdog and consumer advocate Elizabeth Warren. Her courage on this topic is on display today while AIG chairman Robert Benmosche would like to continue to shuffle the shells around in an attempt to continue to play the game. (more…)

Let’s Revisit Whether the Market is Being Manipulated

Posted by Larry Doyle on March 22nd, 2010 9:52 AM |

Is the stock market being manipulated?

I can not count the number of times I have been asked that question over the last 9 months. Rather than my offering personal opinions which market pundits may view as sour grapes or worse, I want to revisit a ten-minute segment of my interview last evening with Phil Davis.

The segment runs from 29:45 until 40:00 (audio player provided below). If you do nothing else today, please listen to this dialogue between Phil and myself. Neither of us goes into this conversation with agendas or preconceived notions in an attempt to score points. I will offer an edited version here. I think you will find the information, thoughts, and opinions offered to be enlightening. (more…)

How Tim Geithner Screwed the American Taxpayer

Posted by Larry Doyle on January 7th, 2010 9:31 AM |

Tim Geithner, then head of the New York Fed, blinked and screwed the American taxpayer out of billions of dollars in the process. How so?

Geithner and his cronies in Washington have misrepresented–if not outright lied–about the payments to both domestic and foreign banks in settling exposures to then failing AIG. While politicians and pundits alike will reference the precarious nature of the time and heat of the moment to defend Geithner and his cronies, the simple fact is the settlement of the AIG swaps at 100 cents on the dollar was nothing short of one of the greatest heists in our country’s history.

This heist transferred multiple billions of dollars from the American taxpayer to the likes of Goldman Sachs, JP Morgan, Societe Generale, and many more domestic and foreign banks as well. (more…)

Does AIG’s Self-Dealing Pose Systemic Risk?

Posted by Larry Doyle on July 31st, 2009 8:04 AM |

While our equity markets are making new highs for the year, I cautioned readers the other day “No Time for Complaceny on Insurance and Money Fund Exposures.” On the insurance front, I specifically highlighted:

Experts Call for Fed Involvement in Insurance Industry — but to Different Degrees; InvestmentNews, July 29, 2009

Members of Congress are being urged to create — at a minimum — a new regulatory body within the federal government to focus on the insurance industry. “There is some systemic risk in insurance requiring a regulator,” said Travis Plunkett, legislative director of the Washington-based Consumer Federation of America, who was part of a panel of experts testifying today at a Senate Banking Committee hearing on modernizing insurance regulation.

“In order to fully understand and control systemic risk in this very complex industry, the federal government should take over solvency and prudential regulation of insurance as well.

Where may this systemic risk within the insurance industry originate? None other than our ward of the state, AIG. We are reminded of the massive systemic risk, if not potential illegal business dealings, occurring at AIG in this morning’s New York Times, which reports After Rescue, New Weakness Seen at AIG:

The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows.

Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble. State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers.

While insurance in general is a pure statistical risk management business, in AIG’s case writing new business and collecting new premiums to pay off current outstanding liabilities amounts to a Ponzi scheme orchestrated by Uncle Sam. (more…)

Board of Health Condemns Due to Moral Hazards

Posted by Larry Doyle on April 13th, 2009 11:05 AM |

danger-toxic-hazardThe best organizations are managed not only for today but for tomorrow. What do I mean by that?  Great organizations assess risks, develop talent, diversify products, and grow market share. Aside from those basic business tenets, the best organizations respond well in times of crisis. 

Every business and organization is ultimately a reflection of its people. To that end, the depth and quality of the people are the single greatest factors in the long term success of the organization. 

Any individual or organization would relish developing a system that generates untold success and then automates the process. Neither business nor life works that way. Change is constant. How organizations proactively stay ahead of change and respond to change is paramount in succeeding in business and life.

The best sports organizations have developed a deep bench of talent both on and off the field. When players or executives leave – as they always do - the general manager moves another body in and the team does not miss a beat. The same scenario occurs in the best companies. This transition process is part of the culture of the organization.  (more…)

Things You May Have Missed

Posted by Larry Doyle on April 7th, 2009 10:08 AM |

The stream of data and market moving news is non-stop. I found these items of interest and look to share them with you as I believe they provide interesting insights and perspectives from around the world. I beg your indulgence if some of these items are not news to you, but if they are I hope they help you “navigate the economic landscape.”

1. Australia’s central bank cut its overnight lending rate to 3%, the lowest level in 49 years. While that rate is one of the highest rates in the developed world, it was widely expected to be left unchanged.  Australia has had one of the strongest economies in the world. This cut is an indication the Australian central bank believes their economy is slipping into a recession.

2. Japan’s exports are reported to be down 40% versus a year ago. Additionally, Japan’s industrial production is reported to be down 30+% during the same time period. These economic figures are significantly weaker than most other developed economies. As a frame of reference, most other developed economies’ industrial production is down 10-15%. Clearly, Japan is so dependent on exports and it is now paying the price of not having more fully diversified its economic foundation.

3. Gold is now trading near $880/oz. A month ago this precious metal was trading slightly above $1000/oz. Why is gold down recently? Coming out of the G-20, there are expectations that the IMF may sell some gold reserves to raise funds for low-income countries. I commented the other day that gold is not perfectly correlated with inflation due to changing fundamentals and technical variables in the gold market. This development with the IMF is a perfect case in point of my assertion. (more…)

Dodd’s Production Run Is Way Down!!

Posted by Larry Doyle on April 1st, 2009 1:51 PM |

Any salesperson on Wall Street is always faced with the question as to the nature of his book of business. Meaning, not only what type of business he transacts but even more importantly, with whom does he do business. While there are many fabulous salespeople on Wall Street, sales managers are forever reviewing account coverage assignments. Given these account reviews and changes, I always maintained that there was not a lot of “security” in the securities business. Ultimately, a salesperson is only as good as his book, meaning the depth and breadth of relationships.

Putting a twist on this coverage model, it appears as if Senator Chris Dodd has a problem. Aside from pure partisan politics in the midst of an economic tsunami, Dodd’s personal relationships with many financial companies has run its course. I do not mean to say that Dodd and these individuals may not maintain an ongoing relationship, but the fact is a number of financial firms which supported Dodd over the years are either bankrupt, merged, or wards of the state. (Freddie, Fannie, AIG, Citi)

Bloomberg reports:

The Democrat has less than half the campaign cash he had at a comparable point in his last re-election bid, when he faced far fewer hurdles. Last year, he emptied an account built up largely through financial-company employees’ donations to pay for a presidential run; now, he has to replenish his coffers even as the firms his panel regulates struggle with losses and back away from their one-time champion turned critic.

(more…)

Financial Logic and Morality

Posted by Larry Doyle on March 22nd, 2009 12:26 PM |

I am a proud graduate of the College of the Holy Cross, a Jesuit institution in Worcester, MA. The strength of a Jesuit education lies in the principles of Logic and Morality. While I fully appreciated my classes in Economics, German, Philosophy, and others, my classes in Logic and Morality made the greatest impact on me. Those classes forced me to think, not make rash judgments, take positions, and defend them.  

Fast forward to 2009 and a banking industry facing hundreds of billions, if not trillions, of unrealized losses. How do we most effectively, efficiently, and expeditiously address the health of this banking system so that our economy and population can regain its footing and prosper?  Let me revert back to the late ’70s and early ’80s and the principles instilled in me by those Jesuits.

 My Logic class utilized “decision trees.” My Morality class was based on the principle of “the greatest good for the greatest number.”

What have we learned over the last 6 months, as well as the last 16 years, to help us chart our way forward? (more…)






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